Observations on economics, the academy, the wider world, and things that run on rails.

8.7.15

WHY "EQUAL PAY FOR EQUAL WORK" IS HARD TO IMPLEMENT.

Despite the recent World Cup tournament run by the U.S. women, including a final that evidently drew more viewers than the Black Hawks winning the Stanley Cup, the financial compensation to the female players is much smaller than the compensation to the male players, including members of the Washington Generals Team USA. Politico notes that Germany's men divided a prize of $35 million for their win, whilst the Ponytails had $2 million to share out. On a permanent-income basis the ladies might have done better hiring out at the White House, where the women collect 80 cents for each dollar of payroll going to the men. Think Progress has the Ponytails "Stiffed by FIFA." (You, snickering in the back row, keep your prurient thoughts to yourself.)

Here's why the Perpetually Aggrieved hate economists. In factor markets, compensation is determined by supply and demand. Labor supply rests on utility maximizing offer curves ... whatever combination of subjective preference and relative prices that induces a young lady to work on her corner kicks when she could be studying constitutional law. Labor demand is derived from the demand for the labor service according to the formula

Marginal Revenue Product = Marginal Revenue x Marginal Product.

In soccer, thus the simplistic appeal of the social justice warriors, the marginal product of an eleven has a lot of components that are the same no matter whether it's middle schoolers or Man United on the pitch: same dimensions, same time limits, same ball, same rarity of scores.

The biggest difference, of course, is that the World Cup, which I will use to refer specifically to the men’s tournament next scheduled to be held in 2018, draws far more worldwide viewership and, thus, far more, sponsorship money, than the women’s does. This will likely always be the case regardless of whatever arguments one might make regarding comparisons of the quality of play between the two games, but in time it’s likely that the women’s game will gain more of a following worldwide, which will lead to better broadcasting deals and likely better revenue sharing for the teams and the players. Additionally, given that this is FIFA we’re talking about, I won’t rule the possibility that corruption plays a role in all of this.

Soccer's governing body doesn't engage in the "amateur sport" foolishness that limits the ability of intercollegiate athletes to do product endorsements, which means the most visible players will be able to supplement their incomes.

The phenomenon the social justice warriors ought to marvel at is the ability of sellers and buyers of labor services to identify arbitrage opportunities in such a way that many job descriptions and pay packages are in fact comparable among industries.